Justin’s note: It’s the next major money-making opportunity for cannabis investors…
One that will create a new wave of millionaires in the years to come. And you can start taking advantage of it today.
That’s the latest from Crisis Investing chief analyst and cannabis expert Nick Giambruno.
Nick says this won’t be the same way people got rich during the first boom in late 2017. During this second “green gold rush,” the big money will come from a specialized, niche market.
One that’s quickly becoming the core of the cannabis industry…
By Nick Giambruno, chief analyst, Crisis Investing
The cannabis industry is changing…
What it takes to become successful as a cannabis company in 2019 is very different from what made the first wave of marijuana companies popular with investors.
As you’ll see, it’s a different set of skills. And few companies will be able to compete successfully in this new space.
But those that do stand to win big… as do investors in those companies.
And today, I’m going to show you why – and where to look for them…
The New Wave of Cannabis Investing
Just about anyone can grow a marijuana plant on his back porch. A quick Google search will teach you how.
So from a practical standpoint, the barrier to entry to producing dried cannabis is low.
This is why the beginning of the “green wave” saw a lot of junk pot stocks rise… and then fall. It wiped out investors who weren’t smart about their speculations.
Now, the cannabis industry is maturing. And it’s more important than ever to be selective about the kinds of companies you own.
You only want companies in your portfolio that have a sustainable, competitive advantage. And as we head into 2020, that means companies involved in cannabis oils.
Major Change Equals Huge Opportunity
More and more medical products use cannabis oil these days. And these products need standardized doses and consistent quality.
It’s not easy to produce cannabis oil with consistent quality. It takes a lot of money and know-how. (That goes for both the technology and the chemical processes the technology is based on.)
Unlike the cutthroat market for dried flowers, this isn’t something any old hippie farmer can do.
It takes millions of dollars and possibly a year or more to even think about starting a cannabis oil extraction facility on a commercial scale… even with the right expertise.
This explains why the cannabis industry is moving in the direction of oils and other extracts.
Today, the market for oil-based products (like edibles) is larger than the market for dried flowers.
This is a major change in the market. And it presents a huge opportunity for smart speculators.
But before we get to that, you should understand why the industry is changing…
From a Specialized Niche to the Core of the Cannabis Industry
Cannabis oil companies have rich margins and high returns on capital.
Even early-stage companies focused on extracts boast margins comparable to those of large-scale dry cannabis producers.
Here’s a quick example: Dried cannabis flower costs about $7.50 on average. It costs about $1.80 to grow it, so the gross margin is about 76%.
For oils, the margin is about 84%. And for edibles containing them, the margin is about 92%, according to cannabis research and media firm Grizzle. The chart below shows this:
This explains why, in legal cannabis markets, products derived from cannabis oils – such as various forms of edibles – have recently come to dominate the market.
Take Colorado. It was one of the first states to legalize recreational cannabis. Sales of dried cannabis flower there dropped from 67% of the total in 2014 to about 44% at the end of 2018.
Other states that legalized marijuana see a similar pattern.
In California, for example, most cannabis is consumed as extracts, including oils. Sixty percent, to be precise.
But that’s just a taste of what’s to come for the cannabis extracts and oils industry.
The biggest opportunities for us in the cannabis industry lie in something called CBD…
How CBD Will Lead the Next Wave of Cannabis Millionaires
CBD (cannabidiol) is a compound found in both hemp and marijuana.
It has incredible medicinal benefits. (You may recall the story of Charlotte Figi, a little girl with severe epilepsy whose life changed after her doctors prescribed CBD oil.)
After President Trump legalized hemp at the federal level last December, hemp-derived CBD exploded.
Total CBD sales in the U.S. could reach $2.1 billion by 2020, according to one estimate. Hemp-based products will make up a little over 20%. Almost 80% will go to cannabis-based oils.
Another estimate predicts that hemp-derived CBD oils alone can generate up to $1.7 billion in sales next year. That’s 70% higher than this year. And by 2023, sales could grow by almost seven times compared to the 2019 estimate.
Hemp-based products as a category are already larger than vitamin E. They could soon overtake Omega-3 (another popular supplement), according to research from Neptune Wellness Solutions.
That’s likely to happen this year. And it’s great news for the companies that make these products… and their investors.
But there’s a catch…
When Demand Grows Quickly… Bottlenecks Follow
Canada legalized cannabis in October 2018. And there is already a deficit of CBD there.
Licensed producers don’t seem to have enough capacity to meet the growing demand. So the country is trying to fill the gap by importing CBD.
Imports aren’t a long-term solution, though.
Canada’s government almost doubled the amount of CBD import permits from 2017 to 2018. But the total amount imported grew by only about 46%. In other words, there’s still a deficit.
Remember, we are only talking about CBD oils… and only in Canada, where they are legalized only for medicinal purposes.
When you consider U.S. market demand, the implications for cannabis extracts are clear. While the demand for oils and other extracts is growing, production capacity is still catching up.
This means first-mover companies have a competitive advantage. And as the supply crunch grows, smart speculators can profit.
I have no doubt the companies specializing in cannabis extraction represent the next major opportunity for cannabis investors.
And the time to get positioned is now.
Chief Analyst, Crisis Investing
P.S. Only one CBD oil stock is uniquely positioned to ride the crest of this wealth wave. This is the most lucrative opportunity I have seen in a long time. That’s why watching my new video presentation is imperative. Go here to view it now.